Rising Prices Creates California Affordability Challenges

The California Association of Realtors (C.A.R.) said on Thursday that the state's housing market is showing "true signs of improvement." The market performed better than expected in April; sales increased faster than at any time in the last three years and median home prices reached the highest level since before the Great Recession.

Sales of existing single-family detached homes in California were at a seasonally adjusted annual rate of 394,070 units, an increase of 7.4 percent from March sales of 367,020.  Even with that increase sales were 7 percent lower than a year earlier, the ninth straight month of year-over-year losses, and it was the sixth consecutive month that sales failed to reach a 400,000 rate. 

"With home prices increasing by double-digits in 2013, many investors have decided to leave the market which is adversely affecting home sales as a whole," said C.A.R. President Kevin Brown.  "While the number of homes sold continued to decline from a year ago, the better-than normal surge in sales activities in April is encouraging and could be an indication that we will see further improvement in the housing market in the next few months." 

The median price of an existing home was $449,360 in April, the highest median price since December 2007.  This was a 3.2 percent increase from March and was 11.6 percent higher than in April 2013 when the median was $402,830.  California has seen an annual increase in its median price for 27 consecutive months.

"Looking forward, it is likely that we will see a more moderate level of price increase throughout the rest of the year, and further improvements in sales in the spring home buying season," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "Increasing home prices, relatively higher interest rates, and tight lending standards, however, will continue to present challenges to home buyers who are facing affordability issues.  Primary home buyers may no longer have to compete with investors in 2014, but instead they need to worry about increased borrowing costs."

The median marketing time for a single family home sold in April was 33.8 days compared to 35 days in March and 27.9 days in April 2013.  The inventory of existing single-family homes tightened from a 4 month supply in March to 3.5 months in April. A six-to-seven month supply is considered typical in a normal market. 

C.A.R.'s sales and price data is gathered in a survey of more than 90 Realtor associations throughout the state and the information is not seasonally adjusted.